Another bubble in the making? Lumber prices spike 33%
Just when exorbitant lumber prices seemed to be behind us, prices are rising again—and experts expect them to climb even higher.
After lumber prices climbed 300% above pre-pandemic levels this spring, do-it-yourselfers—who had been furiously scooping up wood for home-improvement projects—stopped buying. That demand pullback was the driving force that burst the lumber bubble. But as prices crashed this summer, DIYers didn’t rush back. Instead, they held out on the sidelines waiting for even better discounts.
That’s no longer the case: Cheap lumber prices have DIYers coming back in force. Of course, all that pent-up demand rushing back into Home Depot and Lowe’s is again putting upward pressure on wood prices.
“The renovation side of the market seems to have firmed up as families return from summer vacations and some price-sensitive buyers proceed with home-improvement projects now that wood prices have seen a substantial correction,” says Dustin Jalbert, a senior economist at Fastmarkets RISI, where he covers the lumber market.
After falling for 13 consecutive weeks, on Aug. 27 the “cash” market price bottomed out at $389 per thousand board feet of framing lumber—down from the $1,515 all-time high set in May. Since then, it has climbed 33% to $516 as of Friday, according to data provided by Fastmarkets’ Random Lengths to Fortune. That marks the sixth consecutive week of rising lumber prices and puts lumber back in “expensive” territory. In the years leading up to the pandemic, the price usually bounced between $350 to $500.
Ironically, the demand rebound would be greater if not for other ongoing price hikes and shortages. Delays for supplies from copper wire to windows are holding back homebuilders and DIYers alike from doing more projects. Some builders have even stopped taking new orders.
Resurgent demand isn’t the only reason prices are rising again. The Pacific Northwest and British Columbia—the epicenter of North American timber—cut back production in recent months. Some of it is due to wildfires. That’s not the only reason: Sawmills are also cutting back because the bursting lumber bubble saw the industry flip from a historic shortage to an oversupply. At $389 per thousand board feet, some mills weren’t making money.
Lumber prices are expected to continue rising. At least that’s what traders are betting on: The futures price for delivery of a thousand board feet in November is up to $720. If the cash market price were to climb to that level, it would represent another 40% uptick. That said, the consensus in the industry is that we are not headed for another spring 2021 lumber run. The summer pullback on the demand finally gave the supply side—which had been behind since the early weeks of the lockdowns—breathing room to catch up. That should help prevent prices from reaching the astronomical levels we saw in the spring.
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